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As someone who works in online video, the National Association of Broadcasters (NAB) convention – which starts Saturday – always felt like the show of the titans.

When digital video companies started to emerge at the conference about 10 to 15 years ago as the “disruptors,” they were no more than the industry’s “hobby,” to borrow the phrase Steve Jobs used to describe what Apple TV is for Apple.

But any hobbyist getting enough eyeballs, funding and buzz will eventually go pro. The titans of TV distribution are much bigger and they are destined to rule the world, at least in my opinion, for many years to come.

However, the landscape is changing constantly as digital delivery takes center stage.

The Hype: Big Data And Artificial Intelligence

At some point in the future, most TV will be IP-based. This will pave the way for the next milestone: TV advertising will be completely addressable, allowing marketers to do the type of targeted advertising available on web and mobile, at scale. TV is still, and will continue to be, the biggest game in town.

From its early days, TV distinguished itself by relying on data. TV was always about the numbers, and it did an amazing job making TV advertising and ratings seem like a form of science. It was a great story to tell at the upfronts. However, TV analytics are far from perfect. The actual numbers and the insights provided were and remain somewhat vague.

Then came digital advertising. With all its challenges, this is how our ads are going to be sold and tracked in the future. There are still challenges, but it has the potential to offer much better tools down the road. The TV industry gets it, so much of NAB 2017 will focus on big data, actionable analytics and some form of artificial intelligence.

We see signs of that in the market. When it comes to advertising, Roku is now offering “demographic guarantees” based on its own measurement and Nielsen Digital Ad Ratings. Dish is also getting better at targeted advertising with its Sling TV offering, using Adobe’s Media Optimizer.

It is also interesting to see companies that traditionally offered mostly secured video players now turn to analytics for their future growth. Verimatrix did that about two years ago, and Viaccess-Orca is also moving in the same direction. The key question is how to make these insights actionable. For example, Nice People at Work, which historically tracked quality of service for OTT providers, now wants to use the same technology to predict which viewers are not happy with their OTT service and may be a churn risk.

Finally, Nielsen now claims it can take all of its big data and offer marketers automated campaign optimization based on patent-pending artificial intelligence. Monitoring an ad campaign is notoriously hard for both publishers and marketers, so the ability to let machines do it for them sounds almost too good to be true, but this is the future of TV advertising.

The Face-Off: Amazon, Google And Facebook

Amazon has always had a strong presence at NAB with Amazon Web Services, Amazon Fire and Elemental. As another sign of TV and tech convergence, Google and Facebook will also have a big presence on the show floor this year, with all of them at the entrance of the South Upper Hall.

Facebook’s entire presence will focus on Facebook Live, featuring live technology vendors in a single pavilion. Google, being Google, will likely focus on multiple sides of its TV business: the Android TV platform, DFP’s server-side insertion, which is key for OTT advertising, and maybe even YouTube’s skinny bundle that launched earlier this year.

This is just the tip of the iceberg of what will be showcased this year. If we keep in mind the big-picture trends, we will be able to see the path where it is all headed.

Those of us who track the digital video industry closely (or any industry for that matter), know the feeling of going through endless news pieces and reports, trying to find a pattern that will reveal where the industry is headed. The truth is that this is hard to do on a daily basis. There’s simply too much information. However, the end of the year is a great time to take a pause, review the main news that came out this year and try to conclude which trends will gain more momentum in 2017. Here are my top five predictions.

The Year of Skinny Bundles

2017 is going to be crucial for taking the core TV experience over the top. In previous years we saw more content become available online, mostly in the US and the UK, as part of standalone apps (HBO, CBS, Showtime in the US and DisneyLife in the UK), but the TV experience as a whole (think zapping between hundreds of live channels with one DVR to record them all) remained very much behind the traditional walls of cable and satellite TV.

This is changing.

SlingTV in the US and Sky Now in the UK had been the industry outliers but they were recently joined by services from Sony, DirecTV and soon Hulu. Even Comcast, the Goliath of cable TV in the US, is toying with the idea and perhaps even Amazon in some capacity.

What is the basic premise of a skinny bundle? 50-150 live channels for about half of the price of cable, running on top of consumer set-top boxes such as Roku and AppleTV. Subscribing and terminating the service is easy. And the experience is pretty close to TV (if you can live with the occasional buffering). In 2017 we will see this experience getting even better with the addition of Cloud DVR to some of these services – and probably a healthy price war that will make this even more appealing to consumers.

Addressable TV is Here

There are two undeniable (and somewhat conflicting) truths about TV advertising: a) it’s flawed, and b) it delivers results and scale like no other medium. But TV advertising is about to get much better. How do I know? Because over the last year I found myself clicking on at least five “suggested posts” in my feed. Two to three times I even bought something. I can’t recall ever doing that before. So what’s the connection between TV advertising and how display ads are becoming better targeted? Addressable TV.

The notion of being able to serve personalised ads in TV pods has existed for a long time, but the infrastructure was never there. Broadcast TV was always too, well… “broad” to be able to serve each household specific ads based on the online behaviour and consumption patterns of the family. However, as more TV services become IP-based, we can a see path to improve TV advertising.

To date, addressable TV was only present in about 3% of the US market, but next year AT&T is planning to sell targeted ads via Direct TV Now. In addition, Facebook’s Audience Network is testing ad delivery in TV apps running on Roku and AppleTV. If Facebook can do as good of a job on the big screen as it does on mobile and web it will have a bright 2017.

OTT Price War

In 2016 Netflix was finally challenged by other OTT providers, mainly Amazon, who rolled out its video service in 200 countries. Netflix is well positioned to continue to dominate based on its powerful brand and wildly successful original programming strategy (Netflix got the third most Emmy nominees this year; last year it was only placed sixth).

But Amazon is making Netflix sweat a little. First, it rolled out a download feature way before Netflix. And it also started acquiring and producing great content. The next stage in this war is a game that Amazon plays better than almost any company in the world – undercutting the competition. Amazon’s Prime Video launched globally this year, offering the service for $2.99. After an introductory period the price goes up to $5.99, still well below Netflix $9.99 HD plan.

Another indication that prices may be shifting came lately from HBO. At $15/month HBO Now is still the most expensive OTT service, but in some skinny bundles it is now offered for $5. Given that the service adoption has been relatively slow (estimated around 1M in the US), Time Warner and its likely new owner, AT&T, may be willing to give away their premium content for a little less. What will Netflix do then?

The Battle of Social versus Publishers

All social networks and apps are putting extra focus on video. And it shows. In 2016, Facebook launched the highly talked-about Facebook Live feature and as a result it has seen 88% growth in video posts. Twitter streamed NFL games with viewership of about 500K at any given moment and Snapchat is making moves to add more video via its Discovery feature.

With these latest moves, media companies are worried about social apps evolving and becoming competitors for eyeballs rather than another distribution platform to drive viewership and ad revenue for them. In that respect, it is interesting to see how cautious YouTube has been about making a push for original content. YouTube’s strategy is now focused on building the most innovative tools (they recently launched 4K live streaming for 2D and 360 video) for brands and media companies so they continue to upload more content to YouTube. Since Facebook and Snapchat need to grow their revenue much faster than YouTube, they may not be as restrained.

VR Will Grow, MR Will Go Mainstream

The next iPhone launch will be even more festive than usual as Apple marks the 10th anniversary of the device that has changed the world and made Apple the most valuable company on the planet. The iPhone 8 will need to deliver something really spectacular and that thing may be a new Mixed Reality and Virtual Reality technology.

According to some industry experts, like Robert Scoble, Apple will also launch a new Apple TV and iPad that will change how we use video and interact with the world. In addition, 2017 may be the year in which we finally get to judge for ourselves if the mixed reality headset that Magic Leap has been working on is as great as all the initial reviews by the tech geeks who have had a sneak peak. Those technologies, along with Google’s DayDream and Samsung’s GearVR, will make video in VR even more exciting and valuable in ways that we are only now starting to realise.

Developing an incredible OTT TV app that meets your business needs and also creates a real buzz with consumers can prove tricky. Doing this across 10 plus platforms (like AppleTV, Amazon Fire, Roku, connected TVs etc.) sounds impossible. But it can actually be done, if planned and executed correctly. Here are some of the lessons we learned when doing this.

Planning

Building apps for such a fragmented market requires vision, a well thought-out development plan, and relatively deep pockets. But get the app development right and, provided you have great content too, the positive results will speak for themselves.

Creating TV apps is really expensive so combining multiple business models – transactions, subscriptions, advertising, and freemium – to provide flexibility and maximize revenues is critical. Plus adding dynamic ad insertion, VOD and cloud DVR functionality can further increase revenue potential. Much like in the print magazine world, where consumers used to subscribe to more than one magazine to reflect their multiple interests and hobbies, most people will eventually subscribe to more than one OTT service too. But for this to happen subscription prices need to be squeezed.

In this scenario, having a TV app that supports multiple business models – and makes upselling and cross-selling as friction-free as possible – is the only way to realize revenues and profits.

All of this requires a very strong backend system that offers all of the API calls needed to manage the various business rules. In addition, the same platform must be very smart so it is able to distinguish between devices. With the massive fragmentation in the market, different devices require different technologies to perform the same task. For example, the backend will need to support at least three different DRM standards to deliver encrypted content to all devices; the same backend will likely need to support two or three streaming technologies; and the same complexity exists for tracking analytics and running ads. Therefore, you will need a backend that is like a toolbox and can use different technologies in different scenarios.

Writing Code

In such a fragmented market it would be great to reap efficiencies by using the same code with minor variations. Unfortunately, from a technical point of view, this is not easy. Most of the development for smart TVs, Playstation, Wii U, and Amazon Fire is done with a combination of JavaScript, HTML, and CSS. Replacing the HTML and CSS with custom UI or libraries opens up Apple TV and Xbox One. And Xbox 360 requires C# and XAML. But other platforms use proprietary languages: Roku uses BrightScript, Android native is required for Android TV, phones, and tablets, and of course iOS devices require iOS native. So what’s the best approach?

The smartest thing to do is to use what works in the largest number of environments. Start with web development and build outwards from there. Each TV platform has its own design guidelines. Take the guidelines and focus on creating one great design that works across the overlapping 80%. Invest the time you have saved by creating only one design into making that one design fabulous. And don’t be afraid to divert from the design guidelines a little to make your design stand out from the rest.

The approach above is great for connected TVs, Android STBs and Amazon Fire device. For iOS and Roku, you can develop quickly by relying on their templates. Once you have launched on all devices, you can go back and build customized apps for iOS and Roku which will match the look and feel of your web-based apps.

Launching

There are two ways to launch.

Approach one: launch wide but lean. Develop lightly for as many platforms as possible as quickly as possible. The key is to learn quickly—from your growing experience with the platforms, from usage analytics, and from user responses. Then iterate just as quickly. Invest heavily where initial results show promise and reinforce there. As you gather data, you base later-stage strategy on results. Don’t spend too much money in places where it might not be spent effectively.

Approach two: do a Netflix and go all out to cover all platforms from day one. The fact that this is still a relatively immature market means that there’s still market share up for grabs. If you can move faster and stronger than the competition, you can own it. The downside is that this requires immense resources up front, to create tailored apps as well as compelling content. It’s a bigger gamble, but with a commensurately larger potential reward.

Summary

Creating a true cross-device experience is hard unless, of course, you have an army of developers at your disposal. But as platforms like AppleTV, Roku, Amazon and connected TVs become more developer friendly, smaller teams can build such experiences. Since the fragmentation in the video space is here to stay, this endeavor is worth the effort.

Although OTT TV is clearly taking off and competing with traditional cable and satellite almost everywhere around the globe, some still wonder what makes OTT the TV of tomorrow? What makes it so much better?

If you think about it, the television viewing experience hasn’t changed much since This is Your Life aired in the 50s and defined prime-time as we know it today. Why was prime-time so important? Much of it was because those were the hours for the entire family to watch TV together, which made the viewing experience so much more powerful. It took a passive individual experience (a person staring at a screen) and turned it into a social activity (people laughing together, commenting and sharing their thoughts on the show in the days after).

To understand why OTT is going to be the way millennials prefer to watch TV, we need to examine TV time’s biggest competitor for young viewers’ eyeballs – Social Networking. Companies like Facebook, Snapchat and Twitter can teach us how to design a user experience that every TV service aspires to create: engaging and sticky.

It’s worth going back to some of the major social networks’ founders and seeing the principles they emphasized early in their networks’ success. For example, a young Mark Zuckerberg believed:

“The attractive component of this was probably that the base was so localized…we have so much data about what people are doing on the site and how people are using it that it just makes it so that we can really enhance the experience and target stuff towards those people in ways that no one else has really been able to do before.”

That focus on localization and data allowed for personalization, which is what has helped Facebook grow into the $350 billion company it is today.

Snapchat is one of Facebook’s biggest competitors because it dominates the teen/college students demographic: 7 out of 10 snapchat users are millennials. These are the cord-nevers/cord-shavers of tomorrow. So why do they love Snapchat so much? Here’s how Snapchat CEO Evan Spiegel explained their early success:

“Now the mobile phone has really powered the idea of instant expression, which is really showing someone where you are and how you’re feeling in the moment. And this is important as it relates to identity, because really that’s one of the things that’s at the core of social media.”

One reason Snapchat has been so popular is that has allowed people to express their identity as it changes in real time.

So, personalization, identity, and real time—here we have the pillars of social networking. These are also some of the core values that will make OTT services a success.

Identity: OTT’s Big Differentiator

Let’s start with identity. Until recently, the best TV could hope for was to apply some very basic demographics to viewership. With OTT, however, identity is fundamental to the user experience. It begins at authentication. A good user experience makes this easy, perhaps even allowing users to import their online identity straight from Facebook itself. Once users log in, the provider knows who they are, what they watched, what subscription they used or one-time movie they bought.

But it needs to go further than that. A user’s OTT identity needs to feel consistent to them on all their devices. Cloud DVR is the best example of that. It’s a personalized video recording library in the cloud that allows users to enjoy their content anywhere – via mobile, the web, or through connected TVs. Similarly, users can create their own watch lists and see their viewing history.

Turning on your TV app on any device should be like looking in the mirror: you should see any shows that you are in the process of watching, some that you plan to watch next, and a few smart suggestions based on your previous behavior. At the same time, DRM and concurrency tracking are also aspects of identity in OTT, as they are crucial components required to prevent identity credentials from being stolen or shared with others.

Personalization: The Heart of User Experience

When an identity can be carried throughout the OTT experience, this makes personalization possible. Today’s viewers expect a highly personalized service, from the recommendations to even the ads themselves.

Users don’t only want to manage their own favorite lists; they want to be able compare their own viewing history to that of their friends. They expect to be able to set their own notifications so they can be informed about new content that they may enjoy as it becomes available. Their recommendations should be optimized not only based on what they’re watching, but what their social connections are watching as well.

User experience personalization should apply to business rules, as well. Users want to create their own deals, choosing whether to purchase additional services, like cloud DVR storage. They want to pay only for the content that they want to consume. They want to decide what level of viewership they want to engage at—whether free users, paying users, VIP users etc. Giving them flexibility allows them to choose the price point and viewer experience they prefer. They are even coming to expect advertising to be more targeted and relevant to them.

Real Time: Building Off the Advantages of TV

Since its early days, TV has been about live and real-time feeds. A good OTT user experience builds off that, even when offering on-demand services. A good start is incorporating real-time social feeds based off Facebook and Twitter hashtags. Again, we can go further. Users could receive real-time show reminders and notifications. When a user’s favorite show is about to begin or when a movie by their favorite director has been added to the service, notifications could be sent to users in-app or via email, depending on how they set their preferences.

Real-time reactions are even more important on the backend. Real-time analytics are key to making sure user experiences are positive. If something goes wrong for the user, it’s imperative that the service provider knows immediately so they can fix it. Today’s viewers have little patience, and are not shy about making their displeasure known!

Great User Experiences

Social networks have exploded over the past 15 years; OTT is just starting to explode now. By building off the fundamental social concepts of identity, personalization, and real time, OTT providers can develop a great user experience for their viewers, which will make the TV of tomorrow – OTT – resonate so much better with millennials.

As well as the rise of comedian and actor Amy Schumer, 2015 saw the continual rise, and industry acceptance, of over-the-top (OTT) internet TV services such asNetflix and HBO NOW.

One of Schumer’s biggest achievements last year was her Live at the Apollo HBO special. In October, a few days before the show premiered on HBO and HBO NOW (the OTT subscription service that doesn’t require a pay TV subscription), my friend said she was about to sign up to HBO NOW. Her thought process was that she didn’t have a pay TV provider, but she wanted to watch the special as soon as it became available. “It’s $15 per month but you get a seven day free trial,” she said. “I can drop it whenever I want.”

I work at Kaltura, where we design online video services, so through the companies we work with we’re acutely aware of churn – customers discontinuing a service – and the problem it poses for OTT services in particular.

While churn was always an issue for service providers, OTT made it much trickier to fight. With paid TV, it takes one phone call to the call centre, convincing several different representatives that you are definitely quitting. Then you have to take the set-top box to the nearest service centre. It takes determination to go through with it. With OTT video apps, all you need to do is tap the screen and you’re free. The consumer’s dream is the service provider’s worst nightmare.

Subscribers cancelling OTT services as a percentage of the current subscriber base, in US broadband households. Illustration: Parks Associates

A study from Parks Associates (see graphic) sums up the problem. Viewers sign up and get their fix, knowing that they can drop the service any time and subscribe again in the future when a new series or another Amy Schumer special becomes available. In order for OTT to retain its momentum in the market and offer a real alternative to cable and satellite, it must retain customers. A leaky bucket will never reach a tipping point. Today, three main strategies can reduce OTT churn.

A/B testing

The process of showing a modified version of the website to a subset of users and then comparing their behaviour to the regular version proved to be highly successful, especially for Netflix, which has embraced this method from its early days in 2005. Netflix has run more than 1,000 A/B tests with tens of millions of users. It helped the brand redesign its TV app interfaces, launch the personalised log-in pages, improve search and more. The main goal is to increase usage, which leads to increased retention and eventually lower churn.

Raising the quality of experience

Increased usage isn’t enough if the viewing experience isn’t good. Viewers today have the same level of expectations from their OTT provider as they have (or used to have) from paid TV. In a nutshell, it’s the spinning wheel moment. When you turn on a cable set-top box, you don’t ever expect to wait one to two seconds for the video to load. OTT must be on the same level. The problem is that the internet was never designed to stream HD video at scale – and things get even more complicated when it comes to 4K or live video. If a video takes two to five seconds to load, about 20% of users will drop, and after 10 seconds, around 40% will have abandoned it, found a new study (pdf) from the University of Massachusetts Amherst and Akamai Technologies. It was previously hard for OTT operators to notice service issues, but today there are a number of quality of service (QoS) technologies that constantly track buffer time for every user and the video quality of every stream. If there’s reason to believe something is wrong, the operations team will get notified immediately so that they can address the issue by fixing the video file or switching to a different content delivery network. QoS may sound to some like a minor issue, but in markets with increased OTT competition, most vendors offer the same content at the same price. The main competition is on the quality of the experience.

Personalised and social marketing

Yes, those emails, phone notifications and in-app alerts that let the users know there’s a new show available. In OTT, such marketing campaigns don’t have to annoy the viewers. The service marketers should have full access to each viewer’s history so that they can send personalised alerts that will drive engagement and retention. OTT services should also embrace social networks to market to new viewers and go beyond Facebook or YouTube. Many of the young people in Generation Z today spend more of their time elsewhere like on Snapchat and Vine. Strong social marketing will be key for the growth of new OTT services.

With the growth of OTT TV, multiple screen viewing and cord cutting catching on in the U.S., it is unsurprising that what matters in the world of video, TV and advertisers is converging. For instance, in a recent report from June 2015, Forrester Research found that “lack of premium inventory is holding back digital video monetization.” Meanwhile eMarketer published a report about how US adults divide their TV screen time, showing that overall, video time continues to increase. While TV dipped a bit, time spent watching on connected devices more than tripled in 4 years.

So on one hand, advertisers are willing to pay 3x CPM, as their video-spending budget grows at the expense of search and display ads and on the other, viewers are craving content not just on TV, but on mobile devices.

What is the solution that can satisfy both advertisers and viewers? Cloud-DVR.

Cloud-DVR is the biggest differentiator between early OTT deployments (that mainly offer live, some VOD and limited discovery) to next-generation deployments (with advanced time-shifted TV, business model flexibility and full mobile device support). Cloud-DVR is arguably the killer-app that holds all the keys to unlocking the full potential of OTT delivery that will revolutionize our industry.

Cloud-DVR is seemingly simple – it allows end-users to record content on the cloud (instead of their set-top boxes or other hardware devices) and stream the content back on demand at any time. But Cloud DVR is anything but simple, and it has great benefits to all players in the TV consumption food chain.

Service providers can now let go of the expensive set-top boxes with their massive hard-drives, which require much investment and maintenance. Moving the storage to the cloud will allow for more storage with higher CPU for a lower price. Furthermore, service providers will be able to improve margins by offering Cloud-DVR users to pay extra for additional recording quota.

Content providers can set a new price for allowing their content to be Cloud-DVR’ed and downloaded for later viewing. In addition, with dynamic ad-insertion, VOD content can be monetized like never before.

Viewers will have the option to record an endless number of shows, watch them later on any device and also download content to view offline.

Advertisers can get access to more premium content inventory, as fresh and targeted ads can be dynamically inserted in cloud-recorded shows. Advertisers will also benefit from advanced mobile delivery that can easily ban the ability to fast-forward ads and better track engagement.

Storage Challenges are (almost) Solved

Historically, OTT vendors and operators faced challenges that impacted widespread adoption of Cloud-DVR solutions. We are now finally in a place where these hurdles are about to be overcome, including the most pressing one – storage. There are now a few approaches that help obliterate this obstacle, including having service providers record a rolling-buffer of linear channels and enable users to access their recorded shows based on queue point on that one long file. Another approach is to use a combination of core and edge storage with just-in-time transcoding, in order to reduce storage costs. In the US, where shared copies are not allowed, the leading OTT vendors experiment with storing individual copies in offline storage while streaming to users a cached (shared) copy.

Utilizing such technologies, we expect to see several tier-1 deployments offering Cloud-DVR in Europe and Asia by the Fall. Based on the potential benefits of Cloud-DVR to all aspects of the OTT food chain, 2016 will likely be an even bigger year for the industry with accelerated growth for publishers and service providers alike.